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Thousands of models, one story: Current account imbalances in the global economy

  • Ca’ Zorzi, Michele
  • Chudik, Alexander
  • Dieppe, Alistair

The global financial crisis has led to a revival of the empirical literature on current account imbalances. This paper contributes to that literature by investigating the importance of evaluating model and parameter uncertainty prior to reaching any firm conclusion. We explore three alternative econometric strategies: examining all models, selecting a few, and combining them all. Out of thousands (or indeed millions) of models a story emerges. The chance that current accounts were aligned with fundamentals prior to the financial crisis appears to be minimal.

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Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 31 (2012)
Issue (Month): 6 ()
Pages: 1319-1338

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Handle: RePEc:eee:jimfin:v:31:y:2012:i:6:p:1319-1338
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